Walt Bettinger, President & CEO, Charles Schwab
Walt’s talk struck me as incredibly honest and inspiring. He was candid about the fact that Schwab had some major problems back in 2004 that forced them to make a major shift in management. He was also candid in admitting that companies don’t like to stand up and speak about their failures.
In this case, we got the benefit of hearing the story at the right point in time. Schwab HAS managed to make an amazing turnaround, and are in a position today that allows them to reflect back on what they were able to accomplish and share some great learnings and advice with us. Before Walt got started, he mentioned that he was proud to be running a financial institution that has NOT participated in TARP (the Troubled Assets Relief Program), and the crowd broke into spontaneous applause (yes, most of us in the room are taxpayers!). So I think he connected with our hearts (and our wallets) from the start. Let’s hear about how they set themselves up for the relatively strong position they are in today. The story starts in a familiar but not so friendly place for many companies, especially in the financial services industry. It was 2004, and they were plagued with major problems (especially in their retail division): bad profits in the form of nuisance fees, processes that made it hard for customers to deal with the same human being on multiple calls, tumbling net new assets (their key financial performance measure), and NPS of -34%. Chuck Schwab, founder of the company, stepped back in as CEO, and brought in a new management team (including Walt) from parts of the company that were performing better. And the changes began.
I noted in Walt’s bio that he started his career as an entrepreneur at the age of 22. And you could see that entrepreneurial style in the story he shared with us. He didn’t spend time focusing internally at first. Instead, he went straight to the customers and employees who had left Schwab in the previous 12 months, and talked to them himself. This listening process painted the picture he needed to reset the retail division’s strategy...not based on spreadsheets and new value propositions, but instead based on a set of values.
Walt went on to describe how he filtered these values into the new management team and the organization. Their core framework drew on two key pieces of work: the NPS framework, and Forrester’s work on customer benevolence. They coupled the closed loop feedback of Net Promoter with a LOT more direct customer interaction for all the retail division’s employees. In fact, today 9 out of 10 of their employees in the division deal directly with customers.
They also made a commitment to the idea that every customer matters. He told a compelling story of one customer who left Schwab, not because he himself was being charged lots of nuisance fees (the individual was affluent and receiving a different level of service), but the problem was that he noticed the companies policies at the time for entry level investors, and felt they were inconsistent with what he believed in. I wonder what that customer would have said about recommending to a friend or a colleague…
Over the course of the next 3-4 years, the retail business turned around its fortunes completely. As they changed their relationships with clients and invested in providing a lot more help and guidance (for free), those customers rewarded the company by staying with Schwab and referring friends and family members. Net Promoter Scores improved by 60 points, net transfers of assets quadrupled while competitors were mostly negative or flat, and the stock price more than doubled. Today, Schwab gets 55% of new retail clients from referrals.
Overall, this was an inspiring story with an amazing ending. It will be very interesting to see how all of this investment in culture and customer helps Schwab withstand the current turmoil of the financial markets. I think they are quite fortunate to have done this work over the past 4 years. So don’t be surprised if Schwab continues to surprise us with great stuff.
